Sources Of Savings In

India
 Main sources of savings in India

(1) Household Savings

(2) Government Savings

(3) Private Corporate Savings

 (1) Household Savings
The household sector is the largest contributor to domestic saving. It is important as it reflects how efficiently
savings are converted into investment with the role of financial sector’s intermediation in the process. These sectors
include the saving of:
(a) Households (families),
(b) non-Profit institutions like collage, hospitals, etc., and
(c) non-corporate business unit.

Household savings can be divided into three parts, as follows:

(a) Physical Assets :- The physical assets include housing, machinery, furniture, fixture and real
estate.
(b) Financial Assets :-This takes the form of currency, bank deposits, shares and debentures, claims on
government, mutual funds, national savings certificates, life insurance funds and provident and pension funds.
(c) The Unaccounted Savings of the Household Sector :- The unaccounted savings of the household sector are
always kept in the form of gold, silver and durable goods on which information is very scanty. However, on the
basis of estimates the proportion of these assets is placed in a range of 3 to 10 per cent of the GNP in any year.
(2) Government Savings
Government savings come from surpluses of public enterprises and other public financial
institutions. Government savings formed 7.4 per cent of GDP in the economy in the year 2008-09,
which increased to 8.2 per cent in 2009-2010. Since then there has been a steady decline in
government savings which touched 7.9 per cent in 2010-11.
Among the factors responsible for this trend, the most important are:
(a) Deterioration in the overall tax GDP ratio, and
(b) The increasing losses over time made by public sector utilities such as state Electricity and
Water Boards, State Road transport Corporation, and the Railways.
(3) Private Corporate Savings
The share of private corporate sector in total savings was 9.4 per cent in 2007-08. This,
however, came down to 7.4 per cent in 2008-09. But it has been moving upwards since then,
reaching at of 8.24 per cent in 2009-10.
In developed countries, the corporate sector has contributed, significantly to national savings,
while it has not done so in India, in spite of the development within the secondary and tertiary
sectors of the economy and the significant increase in manufactured output.
This is attributed to the following factors:
1. Massive increase in the use of loan capital in Indian industry and the fall in the share of
profit in factor incomes ;
2. Significant position of the unincorporated private sector in Indian manufacturing and
commerce which is reflected in household savings and not in the ‘private corporate
savings’;
3. The taxation policy, which discourages the accumulation of undistributed profits in
companies and corporations coupled with a low profitability syndrome